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Post-coal Pueblo left out in the cold

By Lydia DePillis The Washington Post

Posted:
07/27/2014 12:01:00 AM MDT

Pueblo resident Sharon Garcia doesn't allow lights to be kept on in rooms that aren't being used. Also, she unplugs appliances to save energy because of rising utility bills. (Lydia DePillis, The Washington Post)

PUEBLO — Sharon Garcia is stumbling around her dining room in the dark, trying to find Post-It notes.

As she has for years, Garcia wants to affix the notes, marked with dollar signs, to light switches all around her house. The message to her five kids: Light is expensive.

"Why do you need to turn the lights off?" she asks her son, Mariano.

"Because otherwise there's no money," he answers, dutifully.

"And when there's no money?"

"You can't feed us or take us anywhere."

Bingo, again.

It's not just the light switches, though. Ever since her power was shut off in 2010, Garcia has adopted a Depression-era obsessiveness: She doesn't use the oven in the summer, because it heats up the house, and she uses only one small air conditioner. Even the aquarium goes dark when someone's not in the room.

"If we're not in here looking at the fish, it shouldn't be on," she says.

And yet, no matter how much she rations and cuts, Garcia cannot keep ahead of the fast rise in rates. She runs a day care out of her home, so her monthly bill of about $200 is already higher than average in Pueblo, where the residential rate per kilowatt hour has risen 26 percent since 2010 and, on a per-household basis, is now among the highest in the state.

Garcia's extreme frugality is, indirectly, the result of coal plants shutting down as Colorado transitions to renewable energy. But in Pueblo, it happened in a way that has left poor consumers gasping for relief.

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To a wealthy community, skyrocketing electricity rates might not have much of an impact: When you have a decent-paying job, what's a few more dollars a month on your utility bill?

Pueblo is not that kind of place. With a poverty rate of 18.1 percent, incomes far below the state average and a third of the population on some sort of public assistance, those few dollars can make a big difference here.

So why have rates jumped so much, so fast? The local utility would point to environmental regulations. Local officials would cite the utility's business strategy.

The customers were caught in the middle.

Soon after buying the local utility, Black Hills Energy opted to replace nearly all of its cheap coal capacity with natural gas essentially overnight — which means ratepayers are footing some big infrastructure bills all at once.

It's true, the state of Colorado has pushed its utilities to move away from dirty fuels — years before the U.S. Environmental Protection Agency issued regulations on existing power plants, which are expected to shutter hundreds of coal boilers nationwide by the end of the decade. But there are better and worse ways to transition to renewable sources of energy.

"Black Hills is a utility that has moved beyond coal," says Leslie Glustrom, research director with Clean Energy Action. "The way that Black Hills has moved beyond coal is not the way we want to do it."

Pueblo used to get its power from a coal-fired plant in Cañon City and two natural gas plants built in the 1940s in Pueblo. The local utility, Aquila, bought energy from Xcel when it needed extra; the dependency gradually increased to 75 percent of Pueblo's demand.

Buying energy seemed to make sense in the mid-2000s, when — over strong objections from environmentalists — regulators allowed Xcel to build a new coal-fired plant at its Comanche generating station outside Pueblo, which locals thought would supply their energy needs for the foreseeable future.

But soon after South Dakota-based Black Hills bought out Aquila in 2008, Xcel pulled the plug: It could make more by selling the power at retail rates to customers in Denver.

Local officials say that's when the troubles really began. Looking back, they wish Colorado's regulators had pushed Xcel to keep selling power locally, just as the city signed a 20-year exclusive franchise agreement with Black Hills that essentially allows it to do anything the Public Utility Commission approves.

"The citizens always looked at Comanche as their power plant," Pueblo Councilman Chris Nicoll says . "Nobody thought that a year after they built it, that wouldn't be the company we were buying power from."

The overall problem: Since utility regulators guarantee Black Hills an 8.53 percent rate of return, it has every incentive to build excess capacity and pass the construction charges on to customers.

At the same time, Black Hills shuttered its three older plants to satisfy requirements in Colorado's 2010 Clean Air-Clean Jobs Act, since they would be too expensive to overhaul after decades of minimal upgrades. That meant it would have to find new sources for the power it had lost as quickly as possible, in order to keep the lights on for 93,000 customers.

"Never in the history of Colorado regulatory jurisprudence has a utility had to replace 75 percent of its capacity essentially overnight," says Black Hills vice president Chris Burke. "We don't want to see our costs go up — we're customers as well — but that was one of the unavoidable outcomes of the situation that this utility was in."

Black Hills won rate increases of 12.6 percent in 2010 and 4.9 percent in 2012 — after asking for much more — to pay for two new natural gas turbines and other infrastructure upgrades. This spring, along with a 2-cent-per-kilowatt-hour increase to keep pace with the rising price of natural gas, it filed for another 3.7 percent hike to cover the cost of a $50 million wind plant.

At the end of 2013, the Public Utility Commission approved a plan to build a $70 million third turbine that would be used as a "peaking" facility — a backup used only very rarely, at times of high demand — which will require an additional rate increase down the road.

That's the part that really ticked off Pueblans: There are lots of other ways to manage spikes in the summer where the grid is under the most pressure, other than adding a whole new plant. A utility in the Northeast, for example, pays Walmart to lay off the air conditioning in its stores slightly, which lowers the peak to a level that existing capacity can supply. It's also possible to just buy power from regional utilities at times of dire need — although that would leave ratepayers at the mercy of fluctuating market prices.

Perhaps the best way to lower the burden on fixed power plants, however, is to harness the area's abundant sunshine by encouraging the spread of solar panels on people's homes and businesses. But Black Hills has repeatedly slashed incentives for solar development, creating a shifting cost structure that has driven local solar installers toward other lines of business, while making it nearly impossible for those who bought large solar arrays over the past few years to recoup their investment.

"Suddenly, the ability of that solar power system to save money and pay for itself was negated," says Paul Huber, a solar installer who had to lay off five of his seven workers. "Instead of creating a special rate for people who are enlightened enough to want to invest in solar energy, they punish those who do."

According to the state's Clean Air Clean Jobs Act, 30 percent of Black Hills' capacity will have to come from renewable sources by 2020. The most cost-effective way for the utility to do that is by investing in wind plants, since that's power it can actually sell; Black Hills built a $70 million wind plant. Rooftop solar, by contrast, is simply foregone revenue: The owner of the roof is now no longer a customer.

In any case, Black Hills' profit is on the rise, even as energy use has remained flat. Earnings per share increased by 24 percent over last year in the first quarter of 2014 — all while small businesses in Pueblo struggle to pay their utility bills, and local officials worry that the high cost of energy is repelling others from setting up shop, like a factory that might create hundreds of jobs in the depressed city.

"Their shareholders don't care. Their interest is return on investment — that's how this works," says state Rep. Leroy Garcia, D-Pueblo, who is pushing a bill to give a ratepayer advocate more power at the Public Utility Commission. "There's a reason why they're making so much money."

Want to weigh in?

The Environmental Protection Agency will hold in Denver the first in a series of public hearings on proposed rules that would require power plants to cut carbon emissions.

The meetings are from 9 a.m. to 8 p.m. Tuesday and Wednesday.

Slots to speak during the 22 hours are already booked, but the meetings are open to the public. Also, the EPA will keep a waiting list.

The hearings will be held at the EPA's Denver headquarters, 1595 Wynkoop St.

The EPA, which will hold hearings in other cities, also is accepting comments in writing. The EPA says it will consider written remarks equal to those spoken at hearings.

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